Correlation Between Daejoo Electronic and INNOX Advanced
Can any of the company-specific risk be diversified away by investing in both Daejoo Electronic and INNOX Advanced at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Daejoo Electronic and INNOX Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daejoo Electronic Materials and INNOX Advanced Materials, you can compare the effects of market volatilities on Daejoo Electronic and INNOX Advanced and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Daejoo Electronic with a short position of INNOX Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daejoo Electronic and INNOX Advanced.
Diversification Opportunities for Daejoo Electronic and INNOX Advanced
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daejoo and INNOX is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Daejoo Electronic Materials and INNOX Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INNOX Advanced Materials and Daejoo Electronic is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Daejoo Electronic Materials are associated (or correlated) with INNOX Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INNOX Advanced Materials has no effect on the direction of Daejoo Electronic i.e., Daejoo Electronic and INNOX Advanced go up and down completely randomly.
Pair Corralation between Daejoo Electronic and INNOX Advanced
Assuming the 90 days trading horizon Daejoo Electronic Materials is expected to generate 1.49 times more return on investment than INNOX Advanced. However, Daejoo Electronic is 1.49 times more volatile than INNOX Advanced Materials. It trades about 0.04 of its potential returns per unit of risk. INNOX Advanced Materials is currently generating about -0.02 per unit of risk. If you would invest 7,141,488 in Daejoo Electronic Materials on August 25, 2024 and sell it today you would earn a total of 1,578,512 from holding Daejoo Electronic Materials or generate 22.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daejoo Electronic Materials vs. INNOX Advanced Materials
Performance |
| Timeline |
| Daejoo Electronic |
| INNOX Advanced Materials |
Daejoo Electronic and INNOX Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daejoo Electronic and INNOX Advanced
The main advantage of trading using opposite Daejoo Electronic and INNOX Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daejoo Electronic position performs unexpectedly, INNOX Advanced can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in INNOX Advanced will offset losses from the drop in INNOX Advanced's long position.The idea behind Daejoo Electronic Materials and INNOX Advanced Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| INNOX Advanced vs. SK Hynix | INNOX Advanced vs. People Technology | INNOX Advanced vs. SIMMTECH Co | INNOX Advanced vs. Haesung DS Co |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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